Steemit Crypto Academy Contest / S6W5 - Common Crypto Scams And How To Avoid Them

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I would like to start my post with a simple question.

Is everything in the crypto world a scam? The answer is NO!

Unfortunately, we will always find scammers in the real world and even in the world of crypto. In fact, cryptocurrency payments are more open to scams than any other payment method.

My understanding of crypto scams

It is Sunday night and South Africans are sitting glued to their television screens watching a TV show called “Carte Blanche”. Tonight they will be showcasing a lucrative crypto investment. Investment or scam? A host of a radio talk show who overpromised and underperformed. Unfortunately, this will not be the only investigation they will be conducting on crypto scams in months to come.

By now we all know that Cryptocurrency (STEEM, Bitcoin, Ether, etc.) is a digital currency that mainly exists electronically. This means that you will use your electronic devices like your computer, phone, or cryptocurrency ATM to buy cryptocurrency. As long as we depend on electronic devices to perform duties the risk of scamming is there.

Crypto scam is when scammers find ways to get you to either get rid of your cryptocurrency, get you to invest in a crypto scam like fake coins, or stole your identity.

The scamming normally starts with that an “unexpected” email, text, or phone call.

It is my view that the world of crypto is attractive to scammers due to six main reasons;

1. The current economic position worldwide
2. Transactions are irreversible
3. Transactions are anonymous and not easy to trace
4. Transactions happen globally
5. Tracing the network of scammers is no easy task
6. The lack of regulated authorities

September 2022 – Chainalysis reported that 6.2bn USD was stolen for the year by scammers. This was an increase of 80% from the previous year.

Crypto scams are not going to go away therefore, be prepared and alert at all times.

Types of crypto scams

The world of crypto scammers is never boring, well, that is what I think. There is always someone that falls for their traps and there are always new ways to be discovered.

There are so many different crypto scams going around that it is impossible to discuss all of them. I am going to list the top 10 scams for me.

Ponzi schemes are what I call “circle” schemes. What these schemes do is pay the older cryptocurrency investors with what is raised from new investors.

To make it attractive for new investor’s cryptocurrency scammers will tempt new investors with well-known crypto coins like bitcoin and promises of a quick and high return on their investments. When there are no new cryptocurrency investors the scheme will fall flat.

They are those schemes that we read and hear about every day, ordinary people like you and me who became multimillionaires through investing in cryptocurrency but who you never get to meet in real life.

Rug pull scams are exactly as it says, pulling the rug from under the investor's feet. This scam involves developers who will create a new crypto coin. They will then market this coin, get investors involved and defraud the investors in many ways.

There are three main crypto rug pull, dumping, liquidity stealing, and limited sell orders.

Dumping
This happens when developers buy and sell their own coins. What they will do is market the coin, wait for the spike in price, and then sell their coins quickly. The number of coins they sell is not one or two but plenty. Dumping is not unethical but the amount of coins and how quickly is where the problem comes in.

Liquid stealing
The developers will withdraw the coin from the liquid pool after they have obtained enough investors. By doing this they leave the coin with a value of zero. This will leave the investors with a valueless investment.

Limited sell orders
Cleverly these developers will code a coin in such a manner that they are the only ones who can sell it leaving investors “falling hard”.

In the crypto world, it is referred to as “hard pulls and soft pulls”. Soft pulls refer to scams like dumping whereby hard pulls are when the developers maliciously exploit investors with their coding like with liquid stealing.

As with any application crypto software also needs to be upgraded and updated constantly. What scammers do is to trick crypto holders by getting them to give them their private keys so that they can upgrade the application.

This normally happens when there are legitimate upgrades that need to be down like with the merge of coins.

Although this scam is number 7 on my list I am sure that we will soon see it moving down the ladder as more and more crypto investors operate from their mobile phones.

This happens when scammers get hold of a copy of your SIM card which gives them access to all the data on your phone. They then use the information to get to the authentication codes which enable them access to your crypto wallet and clean it out.

Best of all, this happens without you even being aware of it.

We are all too familiar with this scam as it has been going around for many years. It is usually the older generation and those new to the internet that falls for these scams.

These are those emails that you receive with malicious links to forgery websites. Once you click on these links the scammers have access to your personal data like the keys to your cryptocurrency wallet.

Social media influencers, those followed by so many on social media platforms are so often not the innocent ones. They will often not think twice to earn from scamming their followers. Remember that radio talk host I mentioned at the beginning, well, this is him.

With their Oscar-winning performances, social media influencers will trick their followers in many ways.

• They will get you to send them money or cryptocurrencies by posing as investment experts
• They gather your personal information and they steal your identity through quizzes and surveys

There is only one person you can trust and that is you.

Humans are made to be loved!

We all possess feelings and one of these feelings is the feeling of “belonging”. When we experience a feeling of belonging to someone we feel adored, appreciated, and loved.

Over long periods romance scammers build trust with their victims which are normally those searching for love after a divorce or the death of a partner.

Their background and stories don’t add up and soon they will approach their victims with that “It is an emergency” story requesting crypto payments or giving “financial advice” by showing the millions they have in their crypto wallet.

The Federal Trade Commission refers to these scammers as “pig butchers” as they will first make sure that they will fatten the investor's account much as you do with pigs before you slaughter them.

There are also cases where they will blackmail their victims and request payment in the form of cryptocurrencies.

Pre-mining is when a coin is mined before it is made public. It is known as ICOs (Initial Coin Offering) which rewards the founders, developers, and those who get on board early.

It is a bit like being at a seminar. Which seats are best, the ones at the back or the ones in the front? The front seats are your million-dollar seats.

The same with scam schemes. The ones who join or invest first are the ones who get the most out of it. It is those who joined last who never see a return on their investments.

What the scammers will do is to get well know personalities to market these ICOs for them.

The boxer Floyd Mayweather was one of them. In the end, he landed up with a 3-year ban from promoting any similar products.

High demands for the coin are created which inflates the price before the ICOs. After the ICOs the inside group will release the coins back into the market. The price of the coin will drop drastically and cause financial losses to those late joiners.

Have you seen those social media handles advertising “cheap Bitcoins”? I have.

These are sites that promise to save you money by purchasing digital assets below the market value. Often these are fake sites selling fake crypto products and fake crypto trading sites. They are the ones to prompt you to buy more and more… and more offering huge returns on investments.

The problem comes when you want to withdraw your funds. Gone! They’ve vanished right in front of your eyes.

This scam is the downfall of so many people therefore it is number 1 on my list.

Most of us are looking for a passive income which leaves us open and vulnerable to those quick rich promises. The aim of investment scams is for businesses and individuals to fall into the trap of large returns on their investments.

What shocked me is that we hear and read about them all the time in the media yet, we fall for them. Financial freedom scams or investments scams are similar to a Mc Donald burger, consistent, no matter where you are.

Some interesting facts:

• Crypto is the top payment used in investment scams
• 2021 – Over 81,000 investment fraud cases were reported in America alone which resulted in $680 million
• The age group 30 – 40 is the most likely to report crypto investment fraud
• The age group 60+ is the most vulnerable to being scammed under the “financial freedom” umbrella
• In Australia crypto investment scams made up nearly 50% of scam losses so far for 2022
• Facebook and Twitter are the most used platforms by investment scammers
• Bitcoin investment scam schemes are on the top of the list for 2023

Get-rich-quick schemes are very tempting at a time when people are in need of money and are desperately looking for that way out.

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How to spot these crypto scams

The promise of a guaranteed quick and high return is the first thing to be on the lookout for.

Also, be on the lookout for the following;

• Those “sounds too good to be true” promises
• That call or email out of nowhere, “A friend told me about you”
• “No risk, guarantee, free money” Words you don’t want to hear
• Urgency to act NOW
• The accepted payment method is only crypto
• Sloppy and confusing written content with grammar, spelling, and punctuations mistakes in social media adverts, communication methods like emails, and websites
• Minimum detail about the investment is shared
• Click through links in communications
• Contractual obligations
• Tactics that are manipulating and pressurizing
• Website addresses that are unsecure and start with "http" and not "https"
• Limited or no company detail
• Prompting for personal information

The above list is not foolproof and you can never be suspicious enough.
Of importance is that you search the media for reports.

Scamming close to home

2020 – We were selling our home.

My husband advertised the property on one of your local property portals as well as on Facebook. Soon he received a reply from someone interested.

He met with the guy and after showing him the property he was very interested. He immediately told us that he wants to buy the house and offers us more than what we wanted. We signed an OTP, (Offer to purchase) with him.

He told us that he is just waiting for his money to clear from Sierra Leone, a country in West Africa, and asked for a 30-day extension on the deposit and proof of funds. We allowed it even though we received other offers. My husband was blinded by the unexpected high offer of this buyer.

After 30 days we no longer had other interesting parties and the buyer asked for another 30 days extension which we granted as we were desperate to sell.

Just before the expiring date he came to see us and showed us a letter from the government of Sierra Leone stating that they are busy getting the authorities to release his money. For them to speed up the process he had to pay 2,000 USD and asked if we could lend him the money. He was even prepared to give us back double the amount as soon as his money was released.

He signed a letter of acknowledgment of debt and my husband paid him from his Bitcoin wallet to the wallet address he provide, that of a “friend”.

Another month went past and still no money. After phoning him and receiving numerous promises of him coming to see us he phoned my husband one morning and told him that the money is cleared and the last step is now for the Reserve Bank to clear the transaction as it was millions of dollars. To receive the clearance certificate he needs to provide a certificate to prove that the money was for a project he performed in Sierra Leone and that it was not money laundering.

He needs to borrow another 3,000 USD from us. Red flag!

That was when we realized that we were scammed. Not only did we miss out on a possible sale of our property to another buyer but we also lost 2,000 USD.

We’ve paid our school fees.

What I have learned from this is that;

• you must not be desperate to enter into a transaction. If it happens it happens and if it doesn’t so be it
• you must think with your mind and keep your emotions away
• you cannot trust anyone, not even your fellow countrymen!

I can assure you that we will not be scammed a second time.

How to protect yourself from crypto scams

We all know that when you start a busy the golden rule is location… location… location.

When investing in crypto the golden rule is, do your homework… do your homework… do your homework.

In the case of crypto, your homework is research.

Whether you are dealing with a coin or a token make sure you have the necessary checks in place. For the purpose of this post, I will refer to the coin or token as “crypto”.

First things first, get answers to the following three questions.

1. Is the coin/token verified?

The first thing you need to do is to do a verification on a platform like Etherscan.

2. On how many exchanges is the crypto hosted on?

It will be almost certainly a scam if the crypto is only hosted or traded on a few exchanges.

3. What is the liquidity of the crypto?

The experts tell us that if it is less than $100,000 is not a good crypto. You also need to check if the price and trade are dropping at a significant rate.

You can also use third-party analyzing tools to validate a crypto

Application	Function	Detail
Smell Test	Automated audit	The lower the score, the more likely the crypto is a scam
DEXtools/CoinMarketCap	Records live crypto prices	Help with evaluating the true worth of crypto in real time
DappRadar	Blacklist	If on the list it is a scam
CoinGecko	Crypto details	Not listed, it is a scam. Also display warning notifications
Uniswap V2	Crypto liquidity	Show the amount of cryptocurrency locked in smart contracts

Once you have done your homework and you have taken the next step of importance is to form good habits;

• Use strong passwords
• Choose safe storage for your passwords and keys
• Only use secured VPN’s or connections
• Never share your passwords or keys with anyone!

In 7 days it will be 2023.

Let’s enter the year with open eyes, wide awake to spot those scammers.

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Merry Christmas!

I invite:
@nadiaturrina @gabriela8 and @morpheussa

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